Financial services: amended proposal for a Directive on distance selling

The European Commission has presented an amended proposal for a Directive aimed at establishing a clear regulatory framework for the marketing of financial services at a distance within the Single Market. The Commission has to a large extent followed the European Parliament's suggestions for amendments, in particular by maintaining a "maximum harmonisation" approach, by replacing a two week "warming up period" before the conclusion of the contract with an obligation on the supplier to provide a comprehensive set of information elements and by introducing a general right of withdrawal. The aim of the proposed Directive is to ensure a high level of protection for consumers of retail financial services (insurance, banking and investment services) marketed by mail, by telephone, by fax or by electronic means such as the Internet. It should encourage consumer confidence in such services and provide financial service suppliers with a clearly defined legal framework valid for distance selling throughout the Single Market without hindrance.

The proposal for a Directive, originally put forward in October 1998 (see IP/98/891) coversdistance contracts concerning financial services concluded under an organised distance sales or services-provision scheme, for which the supplier and the consumer make exclusive use of communication at a distance (such as by mail, by telephone, by fax or by electronic means such as the Internet).

The European Parliament's May 1999 Opinion supported the Commission's "maximum harmonisation" approach, according to which the proposed Directive would harmonise at a maximum level Member States' rules on distance selling of financial services. As a consequence, suppliers of financial services would be able offer their products throughout the Single Market, without the hindrance of having to comply with different national consumer protection laws on distance sales.

The Commission has accepted the Parliament's suggested amendment whereby, instead of granting consumers a right to a period of reflection ("warming up") before agreeing to a contract, they would be entitled to receive a comprehensive set of information prior to its conclusion. This would allow consumers to compare various offers on a more informed basis.

Similarly, the Commission has incorporated the Parliament's suggested amendment which would transform the consumer's limited right of withdrawal (in the case of unfair inducement or conclusion of the contract without access to the contractual terms and conditions), as had been provided for in the original proposal, into a general right, without penalty and without giving any reason. Member States would be free to set the "cooling-off" period between 14 and 30 days depending on the financial service offered.

However those Member States which opted for the maximum period would nonetheless be obliged to accept the supply of financial services from other Member States with shorter withdrawal periods. A certain number of financial services have been exempted from the withdrawal right (foreign exchange services, trade in securities, certain short term non-life insurance products, certain types of property loan) on the grounds that such a right would be incompatible with their correct functioning.

Other provisions contained in the original proposal, notably on inertia selling and unsolicited communications, remain substantially unchanged.

Adoption of the proposed Directive would mark an important step towards improving the Single Market for Financial Services, and complement other Commission initiatives to eliminate existing obstacles within the framework of its Action Plan for Financial Services (see IP/99/327).

The Commission will submit the amended proposal to the EU's Council of Ministers with a view to it rapidly agreeing a common position for re-submission to the European Parliament. The Finnish Presidency of the Council has expressed its intention to give priority to securing agreement on this proposal.